Business Supreme Court
01132017_supreme_court_facade_AP J. Scott Applewhite, File/AP

The U.S. Supreme Court building in Washington, D.C.

January 13, 2017

Justices will weigh limits on worker rights to sue employers

WASHINGTON — The Supreme Court said Friday it will decide whether employers can require workers to sign arbitration agreements that prevent them from pursuing group claims in court.

The justices agreed to consider an issue affecting millions of workers who have signed forms waiving rights to bring class-action lawsuits over unpaid overtime, wage disputes and other workplace clashes. Businesses have increasingly used the agreements to limit exposure to large damage awards.

The National Labor Relations Board says such agreements conflict with labor laws giving workers the right to band together to complain about workplace conditions.

Lower courts have split over the issue. The high court will consider three cases — two in which appeals courts ruled that such agreements can't be enforced and a third in which the appeals court said they are valid.

One case involves a form that retail gas station owner Murphy Oil USA required its workers to sign, agreeing that any employment disputes would be resolved individually through binding arbitration. The agreement prevents workers from bringing any legal action as part of a group.

An Alabama employee, Sheila Hobson, signed the agreement when she applied to work for Murphy Oil in 2008. But Hobson and three other workers later sued the company in federal court for failing to pay overtime to them and other employees.

When Murphy Oil tried to enforce the arbitration agreement, Hobson filed an unfair labor practice with the NLRB. The board ruled against the company, saying the agreement violated worker's rights under the National Labor Relations Act. Federal law has long protected the right of workers to join together to protest workplace conditions, including through litigation.

But a federal appeals court in New Orleans said the agreement was enforceable under a different law, the Federal Arbitration Act.

In a second case, the federal appeals court in San Francisco sided with two employees who filed a class action lawsuit against the accounting firm Ernst & Young. The court ruled that the lawsuit seeking unpaid overtime wages could proceed even though the workers had signed arbitration agreements as a condition of employment.

The third case also involves an overtime pay dispute by an employee at Epic Systems, a Wisconsin-based health care software provider. The federal appeals court in Chicago ruled that the worker could file a class action lawsuit and declared an arbitration agreement he signed unenforceable.

The Retail Litigation Center, a trade group representing retailers, had urged the court to hear the cases. The group says arbitration agreements "allow all parties to resolve disputes quickly and efficiently while avoiding the costs associated with traditional litigation."

Consumer advocacy groups have argued that such agreements discourage workers from challenging illegal policies at large companies.